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Another bullion flash crash is testing traders

Section: Daily Dispatches

But not so much to cause them, or financial journalists, to pose critical questions to anyone.

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Another Bullion Flash Crash Is Testing Traders

By Luzi-Ann Javier and Susanne Barton
Bloomberg News
Friday, July 7, 2017

After-hours surges and plunges that have whipsawed gold and silver prices over the past two weeks are unnerving traders. ...

Such moves, which occurred at times when liquidity in these markets is generally lowest, are giving traders an additional headache at a time when investor sentiment is already turning bearish. Hedge funds are retreating, while exchange-traded fund investors are pulling out of gold, pushing the precious metal to the lowest in almost four months.

"All fundamental factors aside, it does tremendous technical damage to the market," Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said by telephone. "There should be some effort to study this and come to some solution that will make for a more orderly trading pattern. This type of activity is not good for a fair playing field."

... Dispatch continues below ...


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Gold has lost about $47 since the session before that 1.8 million ounce-trade that many blamed on a "fat-finger" or erroneous trade. While O'Neill believes that trade may have been done in error, he said the precious metal struggled to bounce back from its low on June 26 because the transaction pushed the price below the 200-day moving average, triggering automated sell orders set by algorithmic traders, thereby sustaining the slump. ...

"These so-called 'flash crashes' that occur periodically are frustrating to traders caught on the wrong side of the downdraft," Jim Wyckoff, senior analyst at Kitco Metals Inc., a research company in Montreal, said in report. "It also makes many market watchers question the viability of futures markets, which are supposed to create more liquidity and better price discovery."

... For the remainder of the report:

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